PwC urges Qatar to deepen capital markets

29 January 2015

Initial public offering market expected to gather pace in 2015

Qatar needs to expand its capital markets to help diversify its economy and lessen its reliance on the hydrocarbons sector, says Stephen Anderson, managing partner at the Qatar branch of UK consultancy PwC.

“There is a need to deepen that market,” he says, speaking to MEED on the sidelines of a conference in Dubai on 27 January.

Anderson says the upgrade to emerging market status last June by US index compiler MSCI has helped attract more foreign investors and boost liquidity, but the market remains constrained.

There are only 43 equities listed on the stock exchange and the initial public offering (IPO) market has been “very slow,” he says, with just one IPO closed in the past four years.

A report released by PwC in January also recommends the growth of the debt market, suggesting Qatar should reduce barriers for the issuance of more corporate debt.

Doha has been active in deepening the sovereign debt market by regularly issuing bonds to build a yield curve and set a precedent in terms of pricing debt.

On 25 January, Qatar’s Economy Minister Sheikh Ahmed bin Jassim bin Mohammad al-Thani was appointed chairman of the board of directors for the Qatar Stock Exchange.

Anderson expects this reorganisation to lead to increased efforts to expand the capital market.

“We’d expect 2-3 IPOs to come to market this year,” he says.

The need to diversify Qatar’s economy could become more urgent due to the current low oil prices.

PwC’s new report suggests the Gulf country is relatively insulated from the oil price decline due to its greater reliance on gas exports. The report anticipates that real GDP will continue to grow at 6.5 per cent in 2015.

Anderson says Qatar is not immune to the decline in oil prices, however, and that there will be “closer scrutiny” paid to planned infrastructure projects and related operational costs.

Bank appetite to support these infrastructure projects will remain intact, he says.

“We certainly see a lot of liquidity out there and [banks] are keen to take on Qatar risk as they still believe in the Qatar story,” says Anderson.

Follow Rebecca Spong on Twitter: @Rebecca_MEED 

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